Tesla Driving Past Supply Concerns, Says Analyst

Ongoing supply shortages continue to hurt automakers by taking a toll on their production. However, EV giant Tesla (NASDAQ:TSLA) has navigated the crisis well and has remained one step ahead on this front, noted Robert W. Baird analyst Ben Kallo.

The analyst is bullish on TSLA stock and stated that Q1 faced continued challenges from “supply chain, labor, and inflation.” However, “despite these headwinds TSLA production was relatively in-line and beat margin expectations.”

Notably, Tesla continues to deliver impressive production and delivery numbers. Tesla produced 305,407 vehicles in Q1 and delivered 310,048 vehicles during the same period. The Q1 delivery numbers represent growth on both a year-over-year and quarterly basis. 

Further, its top line continued to grow rapidly, aided by higher deliveries and an increase in average selling prices.

Looking ahead, Kallo has trimmed the Q2 delivery numbers estimate, citing the Shanghai factory’s downtime. However, he kept his full-year estimates unchanged. Kallo expects the Berlin and Austin factories to make up for the loss of production in Shanghai. 

Over the multi-year horizon, Tesla expects to achieve about 50% annual growth in its vehicle deliveries, which is encouraging. However, it warned that the supply chain could be a limiting factor for the rest of this year. 

Along with Kallo, Wedbush analyst Daniel Ives is also bullish on TSLA stock. Ives found Tesla’s Q1 automotive gross margins “impressive” amid “dramatic headwinds” in China along with “increasing component costs across the board.”

Commenting on the delivery numbers, Ives added, “With the supply chain issues still a lingering overhang on the auto space and logistical issues globally, we believe these “Cinderella-like” delivery numbers in a brutal supply chain backdrop speaks to an EV demand trajectory that looks quite robust for Tesla heading into the rest of 2022.”

Bottom Line

Tesla’s financial and operational performance have been impressive. Its strong delivery numbers, margin improvements amid a challenging environment, and ability to navigate the supply challenges bode well for growth. However, macro and geopolitical uncertainty and the lack of new model launches could limit the upside potential for TSLA stock. 

Due to industry-wide supply concerns, TSLA stock has received a Moderate Buy consensus rating based on 15 Buy, eight Hold, and six Sell recommendations. Meanwhile, the average Tesla price target of $1,001.82 is roughly at par with its current market price. 

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